Coupang's Secret Weapon Against Aliexpress and Temu
News has surfaced that Chinese sellers have started to aggressively target the South Korean market by utilizing Coupang's logistics network. Notably, like Korean sellers, Chinese sellers can now store inventory in Coupang's domestic logistics centers and use Coupang's fulfillment service (Rocket Fresh) for fast logistics, putting Korean sellers on high alert.
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Following the release of previous content, new information has emerged. According to several sellers active in China and Korea, Coupang intensified its sales operations for Chinese sellers at the end of last year through its Coupang Global Fulfillment (CGF) program. This move by Coupang, along with various promotions for Chinese sellers, serves as a defensive strategy against the expanding market share of Chinese platforms like AliExpress and Temu, signaling a crisis-like disaster for sellers sourcing Chinese products and competing Korean platforms.
CGF is a service where Coupang provides global logistics services from China to Korea targeting Chinese sellers. It divides into two types: one where inventory is stored in local Chinese warehouses and Coupang handles all logistics including export/import customs and international and local Korean deliveries, and CGF LITE, where sellers ship inventory to Chinese warehouses after receiving customer orders, with Coupang then handling all subsequent logistics. This is akin to Shopee's logistics service for Korean sellers, but provided by Coupang in China.
Sellers report that Coupang has been actively hosting introductory sessions for manufacturers and sellers in China, offering comprehensive consultations and consulting on entering the Korean market, including business registration in Korea and entry into Coupang Marketplace, and using local fulfillment. Additionally, Chinese sellers are offered significantly lower sales commissions compared to domestic sellers as an incentive.
Domestic sellers have been leveraging Coupang's policies in various ways. For instance, sellers with Chinese business entities reduce sales commissions by using CGF, pretending to be Chinese sellers. Even with international shipping costs between Korea and China, fees can be lower than entering the Korean market directly.
Coupang's enhancement of CGF differs from its previous international sourcing methods like Rocket Direct Purchase and Coupang Imports. Rocket Direct Purchase offers categories for various countries, allowing users to buy famous brand products from each nation. Coupang has increased the speed of international logistics by storing inventory in local logistics centers abroad.
Coupang Imports features a tab showcasing products directly imported by Coupang. Unlike Rocket Direct Purchase, which involves slower deliveries from overseas, Coupang directly purchases international goods, stores them in Korean logistics centers, and delivers them within the Rocket Delivery timeline.
Both services primarily focus on brand products, famous or relatively cheap in their respective countries. The U.S. Rocket Direct Purchase store features supplements and food, while the Chinese store is rich in electronics, especially from Xiaomi. Due to the direct purchasing model, unsold inventory risks are borne by Coupang, requiring careful sourcing and limiting category expansion.
In contrast, Chinese sellers entering Coupang through CGF since last year compete in the same marketplace as Korean sellers, mainly offering non-branded, low-involvement products manufactured in China, the world's factory. Sellers bear inventory risks, allowing rapid assortment expansion, enhancing Coupang's price competitiveness, and positioning it against AliExpress and Temu.
Traditional sourcing through Rocket Direct Purchase and Coupang Imports likely continues, protecting brand products with consistent quality and customer demand. For Coupang, maintaining direct relationships with existing supply brands is more beneficial for revenue than becoming a brand itself.
However, for purchasing agents and import sellers sourcing Chinese products to sell on Coupang, this shift is disastrous as they now directly compete with manufacturers and brands. As previously predicted, Coupang has followed this path, now a reality.
Coupang's strategy mirrors Amazon's, expanding marketplaces worldwide and sourcing products globally, including from China. Despite not having a marketplace in China, Amazon maintains its AGS (Amazon Global Selling), emphasizing the importance of Chinese manufacturers and sellers as major suppliers. Amazon's FBA (Fulfillment By Amazon) and its global logistics network have enabled rapid delivery services, making it a dominant player in North American and European commerce markets.
Coupang's recent strategy aligns with this, focusing on diverse sourcing, including from Chinese manufacturers and sellers, while enhancing its marketplace share. Korean sellers feel the pressure as Chinese sellers target top-selling categories, introducing products at significantly lower prices or leveraging greater capital and volume, a scale that's challenging to match. The extent of Coupang's protection for domestic sellers remains uncertain.
Industry speculation suggests Coupang could absorb a significant market share in Korean commerce. Competing platforms collaborate with sourcing agents to retain market share, but this short-term strategy might weaken their competitive position in the long run, especially as Coupang integrates direct sourcing of Chinese products with its robust logistics capabilities.
Korean sellers must adopt differentiated strategies as Coupang emulates Amazon, which has faced issues with Chinese copy products and review manipulations. Similar challenges are expected for C
oupang, highlighting the need for purchasing agents to curate trustworthy products rather than merely replicating Chinese product listings on Korean platforms.
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